MAJORITY of entrepreneurs are part of what we call “MSMes.” They contribute to economic growth not only of our country but in the global business landscape.
If you plan to start a business, a seasoned “solopreneur” or business owner, here are some tips on how you can manage your business income.
1. Create a detailed budget. Developing a comprehensive budget that shows your expected income and expenses will help you avoid losses or if you are still in the early stage, it can help you achieve profitability in a faster timeline.
2. Minimize fixed costs. If you are able to minimize your fixed costs such as rent, salaries, utilities, advertising expenses, subscriptions and other stuff, you will be able to improve your profit margins, increase flexibility and better risk management. For example, a business unit can have better profit margin in each unit of product or services sold. In terms of flexibility, your business will be able to adapt quickly in changing market conditions. It can also help a company be more resilient in economic downturn and unexpected challenges.
3. Customer payment terms. By establishing clear and reasonable payment terms with your customers, you can have ease of collection, strengthen your reputation, reduced financial stress and increased customer loyalty. For example, a reputation for reliable and efficient collection will allow you to get referrals from your customers resulting to higher sales volume.
4. Invest wisely. As an entrepreneur, there will come a time that you are now able to expand your business, for scenarios like this, you might be thinking of investing in equipment, talents or other relevant stuff for your business. Before investing into something, you need to consider the possible return and risks so you can maximize your resources and avoid falling into a pitfall of bad investment decisions. Here are some steps on how you can invest wisely:
1. Conduct a thorough business analysis. Evaluate your current business metrics, strengths, weakness, opportunities and threats. This can be done together with your team on a quarterly, semi-annual or annual basis.
2. Develop a clear expansion strategy. By defining your business goals and objectives, you can easily align your investments to map out your current situation to your desired future state.
3. Understand your finances. Before expanding, it is important to determine your fund capacity, may it be through your profit, loan or other streams of income. This will allow you to ensure stability of day to day operations before venturing out to your investment plans.
4. Risk assessment. Identifying the potential risks associated with your expansion, you can now be more strategic in your next step. Example of risks can be market risk, competition risk, regulatory risk and economic related risks.
5. Technology and infrastructure. Investing in technology can improve your organization’s efficiency, streamline operations and enhance customer experience.
6. Diversification. Exploring opportunities and spreading your eggs in multiple baskets is always a good strategy to minimize risks and maximize potential returns.
7. Monitor and evaluate. Once you have invested already, it is important to establish key performance indicators to measure the success of your expansion efforts.
After implementing the strategies in expanding your business and maximizing your start-up revenue, here are the Key Performance Indicators that will help you assess if the expansion has been effective to your business.
1. Sales and marketing. Revenue growth rate, customer acquisition cost, conversion rate and lead to customer ratio are the aspects that you can measure in terms of your expansion.
2. Financial. Gross profit margin, operating cash-flow, accounts receivable turn-over are the aspects for your evaluation in the aspect of financials.
3. Operational. Inventory turn-over (if actual products) are being produced/sold, on-time delivery, employee productivity and customer support response time will be your metrics in your operational side.
I hope you will grow more in your business as you pursue in growing as a business person. In the dynamic landscape of today’s business world, growth is not just a goal, it’s a necessity.
Karlo Biglang-awa is a registered financial planner of RFP Philippines. To learn more about personal-financial planning, attend the 105th RFP program on January 2024. To inquire, e-mail firstname.lastname@example.org or text at 0917-6248110.